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AT&T needs Apple more than Apple needs AT&T

Ah, if only I could be a fly on the wall listening to the negotiations between AT&T and Apple. AT&T's exclusive agreement to carry Apple's iPhone is due to expire next year, and the Wall Street Journal reported last week that the operator is in talks with Apple to extend the deal through 2011.

Apple certainly has all of the leverage this time around. A new report from Fitch Ratings indicates AT&T increased its market share in the second half of 2008 by 550 basis points to 33.7 percent, thanks mostly to the iPhone. And the operator enjoyed its largest sequential jump in data revenue to $338 million in the fourth quarter.

With the iPhone's proven ability to grow revenues, AT&T has to be searching for ways to sweeten its deal with Apple. Won't many of the iPhone contracts AT&T customers signed in 2008 come up for renewal in 2010? And the biggest complaint among iPhone users has been AT&T's 3G coverage. Interestingly, AT&T CEO Randall Stephenson told the WSJ that with or without the iPhone, AT&T will invest heavily in wireless in an effort to "future-proof" its business, committing two thirds of the operator's capital expenditures in the next five years to mobile network investments and acquisitions.

Moreover, the largest U.S. operator is no doubt knocking on Apple's door. Last week, the WSJ also interviewed Verizon Communications CEO Ivan Seidenberg, who said Apple likely would be willing to work with Verizon on bringing the iPhone to the operator once it launches its Long Term Evolution (LTE) network. He said Apple never seriously considered making a CDMA version of the phone because of the technology's limited global reach as compared with GSM. LTE, on the other hand, is rapidly becoming the 4G choice among the world's major wireless operators.

Certainly garnering an iconic device like an iPhone 4G for its LTE network would be a valuable tool for Verizon as it looks to have the first-mover advantage with its LTE network that will be rolled out in 30 or so markets by next year on a commercial basis. AT&T won't start launching its LTE network until 2011, but I wouldn't be surprised to see the operator making an even earlier commitment if it would prevent the loss of the iPhone and momentum to Verizon. LTE handsets aren't likely to be ready until mid 2011, but if Verizon's rollout plans stay on track, there should be enough scale for an iPhone to gain traction.

One thing is clear today. AT&T needs Apple more than Apple needs AT&T. Last August, it was Apple that extended exclusivity with AT&T until 2010. Now with the iPhone's widely proven success and outside temptations--namely Verizon Wireless--there may be little AT&T can bring to the table that will enable the operator to keep its exclusive grip in the iPhone.--Lynnette

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More stories about Wireless Operators   Verizon Wireless   Network Investments   Ivan Seidenberg   iPhone   handset exclusivity   AT&T  

Comments

"550 basis points"

Right off the bat your credibility drops like a stone. Ameasly 5.5%, from 28.2 to 33.7%? That's chickenfeed. AT&T does not need an exclusive deal with Apple. To the contrary, it is crippling for AT&T. They need to sell G-phones in particular and a wider variety of phones in general. They also need to stop forcing people to sign on to their expensive data services as a condition to buying a smartphone.

AT&T is self-destructively consumer-hostile. The iPhone is one of many options. As an AT&T subscriber I want more choice, lower prices, and to stop being treated as a barnyard animal whose purpose is to be maximally exploited.

Disagree with the article, but in a different way. Apple needs ATT. Their device won't work "3G" with any other network. TMO's 3G uses different radio frequencies and the iPhone doesn't have EVDO. Can they make an EVDO iPhone in time for a launch when the ATT exclusive expires? As surely as they can make an LTE iPhone. But until one of those materializes, there is no choice but ATT. Even IF they can reprogram the radio for TMO freq's, the coverage is a joke.

AT&T and Varizon need to compete with Sprint's pricing. Their customer service is no better or worse. I would love to have iphones for my family of four...but AT&T is just too expensive and they charge extra for every service. I have disconnected my AT&T home service and come September I intend to do the same with our cell phones. They didn't see the light when landline pricing dropped so I don't expect them to compete on the wireless front either. Customers to them are just entities to squeeze maximal profit from.

Rick,

I have to ask, when is the last time you were with another carrier? I can assure you that AT&T treats its customers better then any other major carrier over the long haul.
You don't have to buy a phone from AT&T ya know? If you want choice, buy one off of ebay, as long as it's compatible with the network.

If you're that unsatisfied, there are options, but I will tell you this, AT&T has a few tricks up it's sleeve yet, so Apple, you can take your iPhone to Verizon, but it's not gonna help as much as VZ thinks, they have a lot of subscribers, but their customer loyalty isn't as strong as AT&T's.

Hey Anonymous who said "AT&T is just too expensive and they charge extra for every service. I have disconnected my AT&T home service and come September I intend to do the same with our cell phones. They didn't see the light when landline pricing dropped so I don't expect them to compete on the wireless front either. Customers to them are just entities to squeeze maximal profit from."

You are simply an idiot who doesn't know what you're talking about. Drop prices? Sure, so AT&T can end up like Sprint? Do you even have a clue what it costs to erect a new cell site? Do you know how much money AT&T is FORCED to spend to 'relocate' their facilities due to road/highway projects or things like new sidewalks getting put in? NO Do you know what AT&T pays the power companies to be attached to their poles EVERY YEAR PER POLE??? No! So why don't you educate yourself on the differences between CLECS and ILECS because if it wasn't for companies such as AT&T, who the government screws every chance it gets, YOU WOULDN'T HAVE ANYWHERE NEAR AS GREAT AS SERVICE/TECHNOLOGIES AS YOU DO!!

PEOPLE: Stick with AT&T, you'll only regret it if you don't, I found out the hard way. Especially if you can get U-VERSE in your area and AT&T VoIP for your home phone!!!

BTW, another lesson learned: Disconnecting your landline is stupid.. it's only about 20.00/m and may save someone's life when you can't find your cell phone or the battery is dead!! It's just like a small insurance policy, especially if you love your family!

I used to have the iphone (original). It was a nice device but I sold it after one year. I could not hear too well, the speaker was too weak and the internet was too slow. Both companies need each other. If it was not for apple, ATT would not be big. I would not sign with att if it was not for the iphone. On the other hand, apple needs att because it will not be compatiable with other carriers period unless they made one for verizon before they made one for att. For the person that said att is spending so much for towers and other things. Well, why cant you say how much is att is making and ripping people off. If you get an internet for $20 a month why are they charging people $30 a month besides $20 for text messages. Also, if you can get a 50 unlimted talk with a different company why can't att offer that. I know they have a better coverage than other companies but I'm talking about min. verizon and att are a rip off companies that like to take money away from our hard working Americans.

To the anonymous person who contends that I am an "idiot" for considering a switch to a network other than AT&T..."Me thinks thou does protest too much." Name calling does not advance your argument at all. In fact, I think it only illuminates my point. Infrastructure costs and the government "screwing" AT&T "every chance it gets" are half the equation. The other half is that they pass these costs on to their customers along with a more than healthy (greedy really) profit. All I'm asking is that they make less profit on each customer. They will certainly make up for the difference in volume.

You also seem to insinuate that I may not "love" my family as much as you since I disconnected my landline. I never suggested that I do not maintain a landline for safety sake. I do...Its just not an AT&T landline!

Calling people "idiots" and "stupid" to attempt to justify AT&T prices hardly seems an acceptable measure to convince me to stay with the company. Your entitled to your opinion for sure...but your opinion will not change the amount of money in my wallet that I can spend for wireless service. The personal attack of your argument only spawns me to suggest where AT&T might install its next precious pole.

as a at&t employee and a network technician, let me explain why at&t prices dont drop and compete against other carriers for the most part....mainly because of regulation and tariffs that are goverened by the cpuc and government...at&t is one of the nations biggest providers and responsible for most of the networks across the usa...regulations and tarriffs or government guidlines require at&t or your local telephone carriers depending on which state you live in...give there networks to ilecs,clecs(competitors) at huge discount prices for use to offer there services to consumers... So at&t or your local provider isnt the only game in town and a monopoly...kind of the way cable companies were and are until satelite and uverse & fios was allowed to be offered by local phone networks as of recent...clec's ilec's get to use local provider networks that were installed and maintained for a fraction of the cost of what local provider has to charge to there own customers...so this allows competition or other carriers to charge its customers whatever they feel like to make a profit and to get your business ...all of this while the local phone company maintains the network and while charging regulated rates and terms to its own customers along with state and local taxes for having a network in place and the guidlines for it... these prices are set by local and government tariffs taxes etc....we also have to treat these clecs,ilecs and there customers first and with priority over our own customers or we get fined by them or goverment agencies while our customers have to wait for there service needs... ilec,clec companies don't have to meet deadlines or maintain networks for there customers ,they just sit back and enjoy the profits they make while local providers do the work and spend the money to maintain the network....So what do ilec,clecs do besides third party billing for a network that doesnt belong to them...How many phone company's are there now because of this for you to choose from besides cable companies? (which all are non-local providers)..I'll tell you...they fine the local providers saying they dont offer good service to them for whatever reason they can make up, costing local providers millions of dollars to fight the lawsuits and fines imposed too basically allow them get almost free service and use of local provider networks...I guarentee as deregulation moves thru the senate and congress from state to state basis, consumers will see more competitive pricing from at&t or whoever its local provider is that has to follow these guidelines ....as these laws change and deregulation comes for local providers it will cause ilecs clecs to price match or pay there fair share for the use of the local providers network and the local providers will be able to price compete against the ilecs,clecs or what customers will they have than?...regulation of local providers like at&t has changed the industry of communications, it has put local providers in a position to finally make changes to its networks and services to a non regulated network to be able to price compete for the consumers due to cable companies offering bundles and merging with ilecs clecs or wireless providers...the new networks are voip fios uverse networks,3g,4g,wi-fi built by local phone companies that are not under regulations...coming to everybody soon... it is allowing local providers able to offer telephone service,internet tv wireless wi-fi in a bundle package now...the new fiber optic and wireless technology networks are the way of the future and offer the latest technolgy to give consumers better options and pricing..these new fiber optic, wireless, and cell tower technology are costing billions of dollars to establish but will cost less to maintain in the long run and are becoming more available to consumers for less money without the regulation and unfair competition... so thats why local providers like at&t prices seem so high for now... until all the networks shift into the new era of communication or deregulation and government tariffs are lifted it will seem this way too most of you...

I agree completely. It is mostyly that A T and T is completely disorganized. More than twice I have had to talk to over 6 people who read from a script and never figure out the problem- meanwhile I am being shuffled around like cattle for 4 hours.

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